Dell ( DELL) is batting cleanup, with a chance to hit it out of the park. The leading computer maker reports results for its fourth quarter of fiscal year 2002 ended Feb. 1 after the market close Thursday. Dell thrived in a brutal PC price war over the last year, taking over the lead with 13.3% of the worldwide computer shipments in 2001, according to Gartner Dataquest. After a string of hopeful performances by its competitors, expectations run high for Dell's performance in the slightly easier holiday sales season that capped off calendar 2001. At this point, investors have a lot of data on the holiday season to mull over. Compaq ( CPQ) grew revenue 14% sequentially in its December quarter, while Hewlett-Packard ( HWP) got a 5% revenue boost and improved overall gross margins by 1.5%. H-P
reported Wednesday evening that its personal systems business -- home and desktop PCs, as well as notebooks and PDAs -- grew 22% sequentially. But H-P's margins in the segment illustrated the pinch Dell has put on its peers -- in the quarter finished Jan. 31, H-P's personal systems group finally broke even on its operating margins, compared with a negative margin in the prior quarter of 5.2% (and a negative 2.3% operating margin in the year-ago quarter). Dell has driven PC prices down so low, competitors have been seriously injured trying to compete. To its credit, Compaq improved its PC gross margins by 3% sequentially in the latest quarter. IBM ( IBM) couldn't keep up, with its PC and printing business posting a negative margin in its December quarter and the full year 2001 as well. CEO Lou Gerstner singled out the unit as a candidate for cost-cutting, saying business was slow. IBM highlighted price pressure as one of the unit's woes. Dell doesn't expect overall gross margin to improve in the quarter from the third quarter's climb of 17.6%. Yet Dell announced on Jan. 18 that a 40% sequential revenue increase from its consumer segment would lead to better-than-expected revenue and earnings. The company previously predicted $7.6 billion in revenue and 16 cents a share in profits. Based on what it saw in December and early January, Dell raised its estimates to $8 billion in revenue and 17 cents a share in earnings. Year over year, that would work out to a 9% revenue decrease from the fourth quarter of fiscal 2001 and a 5% drop in profits, but a 7% and 6% sequential jump in revenue and profits, respectively. Wall Street appears to be a bit skeptical about the revenue increase: Heading into Dell's earnings report, consensus estimates called for $7.87 billion in revenue. Analyst consensus is in line with Dell's earnings hopes, projecting 17 cents a share in profit. Perhaps the Street is leery because there has been little positive feedback for the first half of calendar 2002. IBM, Compaq and HP said that the business environment was too close to call. Any illumination from Dell on the subject obviously would allay investor worries. Dell shares are up 46% since the beginning of October.